First Data 2007 Annual Report Download - page 202

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS – CONTINUED
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited)
The components of the provision for income taxes are as follows (in thousands):
For the years ended December 31,
2007 2006 2005
Current
Federal income taxes $ 59,985 $ 50,289 $ 49,701
State income taxes, net of U.S. federal income tax benefit 15,930 12,090 7,822
Foreign income taxes 8 7 —
Total 75,923 62,386 57,523
Deferred
Federal income taxes 4,376 9,328 4,150
State income taxes, net of U.S. federal income tax benefit 114 52 (98)
Total 4,490 9,380 4,052
Total provision for income taxes $ 80,413 $ 71,766 $ 61,575
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes and
minority interest due to the following:
2007 2006 2005
Statutory tax rate applied to income before income taxes and minority interest 35.0% 35.0% 35.0%
State income taxes, net of U.S. federal income tax benefit 1.6% 1.4% 1.4%
Effect of flow-through income (24.6)% (23.5)% (19.2)%
Amortization of goodwill, merchant portfolios and other intangibles 0.1% 0.1% 0.2%
Share-based payment excess deferred taxes 0.0% 0.0% 0.2%
Other, net 0.0% 0.1% 0.2%
Effective tax rate 12.1% 13.1% 17.8%
The effective tax rates include the effect of flow-through income that is included in JPMorgan Chase's and FDC's applicable tax returns. The change in the
effective tax rate from 2005 to 2006 is primarily the result of the integration of CMS in October 2005 that reduced the ownership percentage of FDC Offer
Corp. and subsidiaries in the U.S. operations and in turn reduced the percentage of income subject to tax at FDC Offer Corp. and subsidiaries.
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the book and tax bases of the
Company's assets and liabilities. Net deferred tax assets and liabilities are included in deferred income taxes on the combined balance sheets. The components
of the Company's deferred tax items consist of the following at December 31, (in thousands):
200